Casualty And Property Insurance

281 Questions | Total Attempts: 4773

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Property And Casualty Quizzes & Trivia

Property and Casualty Insurance License Exam Cram


Questions and Answers
  • 1. 
    Which of the following represents a pure risk?
    • A. 

      Terry places a bet on the outcome of a basketball game.

    • B. 

      Margaret's dog is temperamental. She's afraid that it will bite a neighbor someday and she will be held responsible.

    • C. 

      Sam transfers all of his retirement funds into a stock that he expects to rise in value.

    • D. 

      Cindy, along with 32 others, puts $100 into an Indy 500 race pool at work. The person holding the name of the winning driver will win the entire $3,300.

  • 2. 
    The law of large numbers
    • A. 

      Prohibits insurance with extremely high premiums.

    • B. 

      States that there must be a narrow spread of risk for insurance to be effective.

    • C. 

      States that the more examples used to develop a statistic, the more reliable the statistic will be.

    • D. 

      Requires all members of society with insurance exposures to purchase insurance.

  • 3. 
    LaTonya purchases a house from John. She borrows $75,000 from First City Bank that, along with her $25,000 down payment, equals the $100,000 purchase price of the home. Who has an insurable interest in this home? Choose all that apply.
    • A. 

      LaTonya

    • B. 

      John

    • C. 

      LaTonya's son, who would like to inherit the home some day

    • D. 

      First City Bank

  • 4. 
    Highpoint Industries has an automatic sprinkler system installed in its office building. This is an example of which risk management method?
    • A. 

      Avoidance

    • B. 

      Reduction

    • C. 

      Retention

    • D. 

      Transfer

  • 5. 
    Benson Pharmaceutical Company decides not to manufacture a new drug after determining that it has serious potential side effects. This is an example of which risk management method?
    • A. 

      Transfer

    • B. 

      Retention

    • C. 

      Avoidance

    • D. 

      Reduction

  • 6. 
    Because she has always been in good health, Donna decides to cancel her health insurance policy. This is an example of which risk management method?
    • A. 

      Retention

    • B. 

      Control

    • C. 

      Avoidance

    • D. 

      Transfer

  • 7. 
    The tread on Alan's automobile tires is very thin. This is an example of what type of hazard?
    • A. 

      Physical

    • B. 

      Moral

    • C. 

      Morale

    • D. 

      Obvious

  • 8. 
    Which of the following is a hazard as opposed to a peril?
    • A. 

      Fire

    • B. 

      Lightning

    • C. 

      Wet pavement

    • D. 

      Flood

  • 9. 
    Which of the following is not a requirement for forming a valid contract?
    • A. 

      Consideration

    • B. 

      Offer and acceptance

    • C. 

      Competent parties

    • D. 

      Signatures of the parties involved

  • 10. 
    What is meant by a contract of adhesion?
    • A. 

      Both parties are required to provide services for the other.

    • B. 

      One party draws up the contract provisions, and the other party adheres to the terms.

    • C. 

      The contract can be revoked by any party at any time for any reason.

    • D. 

      A contract that is formed without any consideration by either party.

  • 11. 
    Which of the following describes the principle of indemnity?
    • A. 

      After a loss, an insured should be restored to approximately the same condition that existed before the loss.

    • B. 

      Every insured will receive full compensation for all losses in all cases.

    • C. 

      When property is damaged or destroyed, the insurance company must pay the full replacement cost.

    • D. 

      In the case of bodily injuries, liability coverage must be available without regard to any policy exclusions.

  • 12. 
    Which part of an insurance policy describes what property and/or perils will be covered by the contract?
    • A. 

      Definitions

    • B. 

      Exclusions

    • C. 

      Insuring agreement

    • D. 

      Conditions

  • 13. 
    What is the consideration that an insurer gives to the insured under an insurance contract?
    • A. 

      Stated benefits and the dates on which they are to be paid

    • B. 

      The premium

    • C. 

      A promise to pay for certain losses if they occur

    • D. 

      A promise to be conscientious about the customer's situation

  • 14. 
    Under an insurance contract, the uncertainty of events can lead to unequal financial results for the two parties. This means that insurance is what kind of contract?
    • A. 

      Unilateral

    • B. 

      Aleatory

    • C. 

      Conditional

    • D. 

      Utmost good faith

  • 15. 
    The "ground rules" are described in which part of an insurance policy?
    • A. 

      Definitions

    • B. 

      Exclusions

    • C. 

      Insuring agreement

    • D. 

      Conditions

  • 16. 
    A mutual insurance company
    • A. 

      Is managed by an attorney-in-fact.

    • B. 

      Pays dividends to its stockholders.

    • C. 

      Is owned by its insureds.

    • D. 

      Is a voluntary association of individuals that shares in writing insurance contracts for a variety of risks.

  • 17. 
    A nonexclusive agent
    • A. 

      Represents a single insurance company.

    • B. 

      Works for a direct writer.

    • C. 

      Is an independent businessperson.

    • D. 

      Does not collect commissions.

  • 18. 
    Solicitors may not
    • A. 

      Issue or countersign policies.

    • B. 

      Sell insurance.

    • C. 

      Collect premiums.

    • D. 

      Sign an application.

  • 19. 
    At DEF Insurance Company, agents are employees of the company who are paid a salary plus commissions. This is an example of what type of insurance marketing system?
    • A. 

      Captive

    • B. 

      Independent

    • C. 

      Direct writer

    • D. 

      Direct response

  • 20. 
    Which insurance company department is responsible for accepting and rejecting applications based on company standards?
    • A. 

      Underwriting

    • B. 

      Loss Control

    • C. 

      Claims

    • D. 

      Agency

  • 21. 
    Which insurance company department is responsible for paying insureds' covered losses?
    • A. 

      Audit

    • B. 

      Claims

    • C. 

      Underwriting

    • D. 

      Reinsurance

  • 22. 
    Who is responsible for licensing insurance agents?
    • A. 

      Lloyd's Associations

    • B. 

      State insurance department

    • C. 

      Interstate Commerce Commission

    • D. 

      Insurance Services Office

  • 23. 
    Agent Blondell is offering a free television to every applicant who agrees to buy insurance through his agency. In most states, this is an illegal practice known as
    • A. 

      Rebating.

    • B. 

      Twisting.

    • C. 

      Misrepresentation.

    • D. 

      Failure of fiduciary responsibility.

  • 24. 
    J&M Industries does not have a group health insurance plan for its employees. Instead, it pays employees' medical expenses out of a fund specifically created for this purpose. This is an example of
    • A. 

      Fraternal insurance.

    • B. 

      Self-insurance.

    • C. 

      Reinsurance.

    • D. 

      Government insurance.

  • 25. 
    Which of the following statements concerning regulation of the insurance industry is correct?
    • A. 

      The insurance industry is regulated exclusively by the federal government.

    • B. 

      The insurance industry is very loosely regulated.

    • C. 

      The state insurance department is responsible for controlling insurance matters within the state.

    • D. 

      The state insurance department serves only the interests of the insurance industry.

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